NCUA Shares Examiner TDR Guidance

The NCUA has released an internal Supervisory Letter to examiners that reveals how the field staffers will evaluate credit union compliance with recent changes in Troubled Debt Restructured Loan rules.

According to the letter from Larry Fazio, director of the Office of Examination and Insurance, the NCUA will take a risk-based approach to examining TDR management, considering the level of TDR activity, complexity of the credit union and risk exposure. Should the examiner determine that TDR workouts expose the credit union to significant risk, he or she will conduct a “thorough review” based on the guidance set forth in the letter, Fazio wrote.

The examination process will include a check to ensure the credit union is complying with new loan nonaccrual standards that were updated in a final rule issued during the NCUA Board’s May 2012 meeting, the agency said Tuesday.

Examiners will also check written loan workout policies, also required in the May 2012 final rule. According to the letter, the policy must define borrower eligibility requirements, including establishing limits on the number of times a credit union will modify an individual loan.